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Stock futures jump 200 pips after Senate passed $ 1.9 trillion Covid relief bill, Dow futures

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Traders work on the trading floor of the New York Stock Exchange.

NYSE

US stock futures jumped Sunday night as a new stimulus package from Washington headed for the final passage this week.

Futures contracts linked to the Dow Jones Industrial Average rose 219 points, or 0.7%. Those for the S&P 500 and Nasdaq 100 Composite gained 0.5% and 0.6%, respectively.

The move into the future came after the Senate passed a $ 1.9 trillion economic relief and incentive bill on Saturday that paved the way for an increase in unemployment benefits, another round of economic reviews, and aid to government and local governments paved. The Democratic-controlled house is expected to pass the law later this week. President Joe Biden is expected to sign the bill before the unemployment benefits programs expire on March 14th.

The new round of government spending could ripple the US financial market, where the 10-year benchmark yield has risen sharply in recent weeks. The yield rose to 1.62% on Friday after falling below the 1% mark in the calendar year.

The rapid movement of the labeled bond has also unsettled equity investors and contributed to the weakness of stocks with high valuations.

Futures contracts linked to the 10-year maturity fell 0.2% on Sunday evening at the start of trading, which implied higher yields.

“10-year returns have finally caught up with other asset markets. This is putting pressure on valuations, especially for the most expensive stocks that hit nosebleed ratings,” said Mike Wilson, chief US equity strategist at Morgan Stanley, in a note.

The stock market pulled through an afternoon rally on Friday that took some of the sting out of a difficult week for soaring momentum names. The tech-heavy Nasdaq ended the week down 2.1% while the S&P 500 rose 0.8%. The Dow, which relied more on cyclical stocks, rose 1.8%.

Friday’s turnaround doesn’t signal that recent market weakness is over, but the divergence between technical and cyclical games shows that the bullish history remains intact, Morgan Stanley’s Wilson said.

“The bull market is still under the hood, with value and cyclicals leading the way. Growth stocks can rejoin the party once the valuation correction and repositioning are complete,” said Wilson.

In economic terms, starting in January, investors will take a look at wholesale inventory data on Monday. Several economic measures in recent weeks have shown the recovery is accelerating, including a better-than-expected February job report released on Friday.

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Katherine Clark